January 15th, 2018: Carillion, the UK’s second-biggest construction firm, has gone into liquidation, with PwC being appointed to dispose of the beleaguered business’s constituent parts. The company – which relies heavily on subcontractors – has long been criticised for its payment policies towards suppliers. In July, the company issued the first of three profit warnings and said that its reverse factoring facility would be subject to strategic review, with interim CEO Keith Cochrane indicating then that the company would “probably seek to reduce our utilisation of reverse factoring”.
Survival efforts failed over the weekend as debts accumulated to around £900m following a series of acquisitions, loss-making contracts and payment delays in the Middle East. On top of that, the pension fund has a £587m deficit. Trading in the shares was suspended today at 14p, valuing the business at just £61m – 94% less than a year ago.
See also: Carillion’s “aggressive” attitude towards supplier payments has been one of the “red flags” that encouraged hedge fund managers to short the shares in the now-beleaguered construction company which is putting its reverse factoring programme into a strategic review. – SCFBriefing.com, July 2017
The collapse of the company – which has many public sector contracts, including a £1.4bn contract for HS2, the high-speed rail link between London and Birmingham – now leaves suppliers worried as to whether they will be paid. It seems likely that many contracts will be taken over by rival firms. The UK government has said that it will continue to provide funding for its contracts.
Mike Cherry, chairman of the Federation of Small Businesses, told the BBC that unpaid bills may “go back several months” because Carillion takes up to 120 days to pay small suppliers.